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Tether declines to reveal details on $40bn Treasury cache after dollar peg snaps – Financial Times


Tether has refused to disclose details on its $40bn hoard of US government bonds for fear of revealing its “secret sauce”, even as one of the world’s most important crypto assets comes under strain from heavy selling pressure.

Paolo Ardoino, Tether’s chief technology officer, said on Thursday that the group cannot provide information on which organisation is providing custody of its Treasuries holdings, nor where the assets are stored or which firms handle trading on its behalf.

“This is information that is privileged . . . we don’t want to give our secret sauce,” he said in an interview with the Financial Times. “Our counterparties are not public. We are not a public company. So we keep that information [to] ourselves, but we are working with many big institutions in the traditional financial space.” 

Line chart of $ per token showing Tether loses its $1 peg

The remarks came hours after the Tether token’s value tumbled below the $1 peg it is designed to target, raising further concern about the financial stability and transparency in the fast-growing market for stablecoins.

The tokens, intended to be pegged to the dollar, act as a crucial part of the plumbing of the cryptocurrency market because they make it easier for traders to hop between digital and traditional finance. Operators say they hold enough reserves to guarantee every coin produced, typically 1-for-1.

Tether has had $2bn in redemption requests in the last day, an unusually high number, Ardoino said.

With total assets around $80bn, Tether would rank alongside some of the biggest hedge funds in the world. Its declared $40bn holdings of US debt mean it holds a similar amount to Vietnam.

In a Twitter broadcast earlier in the day, Ardoino said the group was prepared to “maintain the US dollar peg at all costs”. He said Tether holds “a ton” of US government bonds and was prepared to sell them to defend the token.

Tether’s fall to as low as 95.11 cents in Europe ricocheted across the cryptocurrency market. Bitcoin, the world’s biggest cryptocurrency, dropped to the lowest level since late 2020 while other tokens sustained deeper selling. The price of Tether later recovered to around 99.4 cents, according to CryptoCompare data.

Stablecoins have been a focus this week after TerraUSD became unmoored from its peg against the dollar and fell to a low of 30 cents. Tether, unlike TerraUSD, claims to be backed by a basket of dollar-based assets.

What is a stablecoin?

Stablecoins are tokens pegged to other assets, usually the world’s biggest and most stable currencies. They act as crypto-native dollars and a bridge between crypto and traditional financial worlds. They also allow traders to more easily convert traditional currencies into cryptocurrencies for trading.

The coins can be lent as collateral for trading, or to generate high yields in the form of interest. They are supposed to have a fixed price and be backed by reserves at all times, allowing users to redeem them. However, critics have questioned where some stablecoins keep their reserves and whether the assets can be quickly recovered and redeemed.

Read more on the FT Crypto glossary

Ardoino said it was consistently possible to redeem Tether for $1 in cash by requesting a wire transfer that would be processed by its banking partners in the Bahamas.

Chris Taylor, a partner at proprietary trading firm GSA, said he is “a little more concerned about [the Tether debacle’s effect on] the ecosystem in general, but for now it seems to be stabilising”. Maintaining the redemption process would be key to restoring confidence in the digital coin, he added.

Tether has long faced concerns about its transparency since its financial statements do not provide granular information on the securities that underpin the stablecoin. The figures are also not audited under generally accepted accounting principles.

Ardoino also said the stablecoin issuer is working on obtaining an audit, but said the big accounting firms “are quite scared for reputational risk in touching crypto at this moment”.

Last year, the US Commodity Futures Trading Commission fined Tether $41mn, claiming the company made “untrue or misleading” statements about its reserves.

Ardoino said the group had recently been shifting away from holdings of commercial paper, a type of short-term corporate debt typically sold by highly rated companies, to Treasury bills. Treasury bills now account for around half of the group’s $80bn in reserves, he added.

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